Strong results from the long weekend
The Anzac Day long weekend proved no deterrent to sales results at auctions across Canberra. According to CoreLogic, 55 properties were scheduled for auction, achieving a clearance rate of 97.7% from 44 confirmed results. Canberra is bucking a national trend of declining clearance rates seen in other capital cities due to high levels of housing affordability.
In comparison to median property values, which are third highest nationally behind Sydney and Melbourne, it may seem odd to consider Canberra as a market with high levels of housing affordability. The highest median weekly family incomes nationally at $2,841 are a key component of Canberra’s historical market resilience to adverse market conditions and what has enabled the market to continue a robust growth cycle.
According to the Real Estate Institute of Australia’s most recent Housing Affordability Report for the 2020 December quarter, households within the ACT devote 23.7% of median weekly family income to meet loan repayments. This was the second lowest nationally behind 21.9% in the Northern Territory. In comparison, the least affordable states required 44.6% of median weekly family income to service median loan repayments in New South Wales and 31.1% in both Queensland and Victoria. This indicates there is plenty of spare capacity for average household budgets in the ACT to absorb larger loan repayments without reaching the critical point of mortgage stress.
Another critical factor influencing increasing property prices in Canberra is our robust local economy. As at March 2021, the rate of unemployment was 3.4%, 1.4% lower than second placed Western Australia. A tight labour market helps keep a floor underneath wages and creates opportunities for wages growth, thus improving overall housing affordability.
Prospective tenants face equally challenging conditions as those looking to buy, as vacancy rates are persistently tight. According to SQM Research data, the rental vacancy rate in March 2021 in Canberra was 0.7% compared to 0.9% in March 2020. CoreLogic data shows low vacancy rates are driving upward pressure on rents; house rental rates increased by 2.4% and units 3% during the first quarter of 2021.
Market analysts hypothesising that rapid growth property values across the ACT are close to reaching the peak and will start to decline often misunderstand the relationship between household income and affordability in Canberra. When your population starts with requiring the second lowest proportion of median family income required to meet mortgage repayments and enjoys the lowest rate of unemployment nationally, there is inherently more capacity to absorb significant price growth without becoming a burden on housing affordability.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward delivery of new buildings. Stream from wherever you listen to podcasts.
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